Alstom - Innovative Infrastructure Finance by Giles Dickson at GIB Summit

1,753 views

Published on

Presented at the 4th Global Infrastructure Basel Summit 21 & 22 May 2014.
Read more about the world leading platform for Sustainable Infrastructure Finance at www.gib-foundation.org.
Next Summit: 27 & 28 May 2015 in Switzerland

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,753
On SlideShare
0
From Embeds
0
Number of Embeds
867
Actions
Shares
0
Downloads
40
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Alstom - Innovative Infrastructure Finance by Giles Dickson at GIB Summit

  1. 1. Global Infrastructutre Summit, Basel, 22 May 2014 Innovative Infrastructure Finance Giles Dickson, VP Environmental Policies & Global Advocacy, Alstom
  2. 2. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Alstom = Infrastructure BUILDING ESSENTIAL INFRASTRUCTURE AROUND THE WORLD
  3. 3. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Infrastructure = minimising risk Four types of risk in infrastructure projects •policy / political risk •capacity risk •commercial risk •technology risk Projects happen if risk is commensurate with reward
  4. 4. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Sharing infrastructure project risk • Public/ Private sector • Private sector • Public/ Private sector • Public sector Policy Capacity CommercialTechnical Presentation title - 01/01/2007 - P 4Allocate risks to those best placed to handle them
  5. 5. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. PPP model Manchester Metro Line 1 Rouen Metrobus Line 1 Arlanda Airport Link Barcelona LRT Ph 1 & 2 Jerusalem LRT Line 1 Florence LRT Lines 2&3 Participation sold In operation In construction Milan metro Line 5 + extension Reims LRT Line 1 Barcelona PPA September 2011 - Page 5 Nottingham LRT Line 2 Alicante-Albacete ERTMS CNM High Speed Line
  6. 6. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. PPP: Barcelona Trambaix Light Rail • €300m • 28 years • private finance: 50 % • traffic risk for operator − 15km line − 19 trams − civil works − power supply − signalling − engineering − operation & maintenance Contract: November 2000 Revenue: from April 2004
  7. 7. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Nimes Montpellier high-speed rail bypass • €1.763bn • 25 years • Private finance: 66% - 80km - civil works - track - electrification - signalling and telecoms  no traffic risk  availability payments on performance  financial close in less than 4 months Contract signed: June 2012 Revenue: from October 2017
  8. 8. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Benefits of PPP model • Simple: single contract • Clear incentives for private entity to deliver • Volume: more projects in shorter time • Effective risk-sharing • Saves time and money
  9. 9. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Limits to PPP model • works well for public service out-sourcing, e.g. in transport, but …. −long-term and inflexible contracts −doesn’t make project more profitable −public debt (consolidation) −needs to be carefully structured −costly tendering process
  10. 10. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Financial instruments to help share and contain risk to help contain risk instruments to help contain risks Technology subsidies Insurance Mechanisms Loan guarantees Credit enhancement Public-Private funds Presentation title - 01/01/2007 - P 10 Risk containment
  11. 11. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. No one size fits all …. Need to distinguish between: • finance for new and re-financing for existing projects • green field and brown field projects • needs of different sectors: − roads − rail − telecoms − water − power generation − power transmission & distribution − airports − hospitals / schools • developed, emerging and developing economies
  12. 12. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Getting public policies right: the basics Government needs to offset the worst downside risks: −policy or regulatory change −inconsistency of regulation or enforcement −nationalization, confiscation or expropriation of assets Mismatch between long-term nature of investment and short-term policy and regulation
  13. 13. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Reducing political risk Governments can reduce political risk by: −long-term, predictable policy frameworks −transparent planning and execution −regulating in support of commercial activity −regional co-ordination of policy and regulation
  14. 14. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Reducing capacity risk Need to reduce capacity risk of investing in developing countries: −Planning and co-ordination −Policy / legal frameworks −Physical / industrial capacity −Financial services
  15. 15. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Helping projects access finance Need to enhance projects’ credit-worthiness • Subordinated debt • Project bonds • Concessional long-term debt financing • Loan guarantees
  16. 16. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Reducing commercial risk Need to support profitability of investments Challenge: • High up-front capital costs • Investors’ sensitivity to commercial returns • Need to revenues / cash flow Responses: • Ensure effective consumer markets, e.g. in power • Advance market commitments • Feed-in tariffs • Price guarantees • CO2 pricing for low-carbon projects
  17. 17. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Alstom PEF Semi-annual Report, April-September 2012 Case study: Caracas metro VENEZUELA: Metro LOS TEQUES 2 • Contract value: €327m • COFACE-covered French export credit funded by BNPP (lead bank), CACIB, DEUTSCHE BANK, NATIXIS, SG, UNICREDIT, CIC • French Finance Ministry approved €667m COFACE cover • Brazilian (BNDES) and Chinese (FONDEN) financing for the balance of the project costs
  18. 18. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. ETHIOPIA: ASHEGODA Wind Farm (120MW) and Transmission Upgrades • Client: Ethiopian Electric and Power Corporation (EEPCo) • Contract value: €100m+ • Concessional loans issued by AFD • Commercial bank loans partially guaranteed by Coface Case study: Ashegoda wind farm, Ethiopia Alstom PEF Semi-annual Report, April-September 2012
  19. 19. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. UAE: DUBAI Al SUFOUH TRAM • Client: Rail Transportation Authority • Contract value: €385m • Type of financing: COFACE-covered French export credit funded by HSBC (lead bank), CITI, DEUTSCHE BANK • Project costs 100% debt financed : ONDD export credit for BESIX’s scope funded by DEUTSCHE BANK, plus IJARAH Islamic loan from AL HILAL BANK Alstom PEF Semi-annual Report, April-September 2012 Case Study: Dubai tram
  20. 20. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Case Study: Vietnam hydro project LAI CHAU Hydro • $127m • SINOSURE export credit • Lenders: BNPP, CDB, BOC & CHINA EXIM
  21. 21. www.alstom.com With Alstom, preserve the environment. Is printing this presentation really necessary?
  22. 22. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Project Financing Structure (Special Purpose Vehicle)
  23. 23. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Public interventions to contain risk • Green banks: to fill gaps in investment that commercial lenders cannot serve • Green bonds: structured with appropriate ratings to allow institutional investors to provide greater debt financing • Public Private Partnerships: apply public finance to the riskier part of the financing structure, to leverage private finance • Insurance mechanisms for policy/political risk • Credit enhancement at the mezzanine debt level • Loan guarantee programs • Underwriting of PPA agreements Presentation title - 01/01/2007 - P 23
  24. 24. © ALSTOM 2013. All rights reserved. Information contained in this document is indicative only. No representation or warranty is given or should be relied on that it is complete or correct or will apply to any particular project. This will depend on the technical and commercial circumstances. It is provided without liability and is subject to change without notice. Reproduction, use or disclosure to third parties, without express written authority, is strictly prohibited. Risks/Challenges for Lenders/Developers • Banks face effects of recession and capital ratio regulation • Pension and institutional investors lack expertise in the area, and can only invest in top rated securities • Private equity funds may be unwilling to take project development risk, or face issues of scale • Infrastructure funds face operation and construction risks and may be unclear on appropriate business models for some projects • Utilities face increased competition, falling demand and weakened balance sheets Presentation title - 01/01/2007 - P 24

×